How are your spending habits shifting lately? Our purchasing behaviors are evolving, and it raises questions about retailers' ability to adapt.
Recently, a headline caught my attention: "Americans Are Shopping For Groceries Like It's 1996." In an era dominated by Uber Eats and other delivery services, it surprised me to learn that more people are cooking at home. In March, grocery store purchases by American consumers reached their highest level in 25 years, with 63% of food and drink bought at grocery stores rather than restaurants.
But food shopping isn't the only area seeing change. Global online sales surged by 209% in April compared to the previous year, as reported by ACI Worldwide. While the pandemic's full economic impact remains uncertain, our shopping and spending patterns have undeniably shifted, and it's unclear if they will revert.
This week, we welcomed Dan Frommer, Founder and Editor-in-Chief of The New Consumer, to discuss how the pandemic is reshaping our spending habits. He shares insights on potential permanent changes versus fleeting trends, and describes how some consumers feel as if "a switch flipped, and we skipped 15 years into the future."
Dan highlights that commerce has shifted predominantly online. By mid-May, retail foot traffic was down 90% compared to the previous year. This drastic drop forced consumers to adapt their purchasing habits, leading to a pronounced increase in online shopping.
Many beloved retailers are finding innovative ways to survive, especially restaurants that now sell groceries and DIY meal kits, like pizza or sushi-making kits.
However, online shopping comes with its challenges, such as the inability to physically examine products before purchase. Technology may help visualize how an item looks in your space, but it can't ensure proper fit, especially for clothing.
Dan notes the rise of direct-to-consumer brands like Warby Parker and Glossier, which attract consumers with their sustainable practices and compelling storytelling. He and I further discuss how consumers increasingly seek purchases that align with their moral and social principles. For example, I've been using Madison Reed for hair color during the pandemic. If you haven't listened yet, check out our episode featuring Amy Errett.
We also explore what consumers are currently buying. There's been a noticeable increase in purchases of home comfort items like leggings, towels, and bedding. With many working from home, we want our spaces to feel safe and cozy, resulting in greater demand for these products. Some of these new buying patterns may stick around as remote work becomes more common, while others, like junk food and puzzles, may fade as life returns to normal.
Looking ahead, we discuss how ongoing unemployment may affect spending habits and where to find great deals during this time—hint: Google shopping is a fantastic resource for discovering new brands.
In our Mailbag segment, Kathryn and I share our pandemic spending experiences and address listener inquiries about 529 funds and the balance between debt repayment and investing. We also explore a question about transitioning from a target-date fund to a custom index fund mix. In Thrive, I outline how networking has evolved during COVID-19, emphasizing the importance of maintaining connections in this new landscape.
Transcript
Dan Frommer: (00:00)
The biggest shift has been that a lot of commerce that was happening in person is now happening digitally. Even in mid-May, something like 90% of retail foot traffic was down year over year. So, in many cases, you simply couldn't do the sort of purchasing and commerce that you were doing in person this year. So, a lot of that is happening online, and then it's been heavily pronounced in certain categories.
Jean Chatzky: (00:28)
We're excited to have Dan here today to help us understand how these trends will impact our spending in the future.
Dan Frommer: (03:11)
My pleasure. Thanks for having me.
Jean Chatzky: (03:13)
What are your observations on the changes in consumer behavior?
Dan Frommer: (05:36)
The most significant change is the rapid increase in e-commerce. People have essentially fast-forwarded 15 years into the future regarding how we shop. The question remains: how much of this will become permanent?
Dan Frommer: (09:43)
I think many people are exploring new ways to shop, with some preferring virtual appointments for personalized service.
Dan Frommer: (22:12)
The importance of purchasing items that reflect personal values is growing, particularly among younger consumers.
In the Mailbag, we tackle listener questions about managing 529 funds and balancing debt repayment with investing. We also discuss the shift toward comfort items and how to network effectively in today's climate.
Thank you for joining us! If you enjoyed this episode, consider subscribing to our podcast. Our music is provided by Track Tribe.
